Oil was steady today, trading near 18-month highs around $87 after a larger than expected drop in US gasoline stockpiles signalled fuel demand was rebounding with an improving economic outlook.
US crude for May gained 10 cents by 0503 GMT to $86.94 a barrel, 15 cents shy of Tuesday's intraday peak of $87.09, the highest price since October 2008. London ICE Brent climbed 14 cents to $86.29.
Gasoline inventories in the US fell a larger-than-expected 3 million barrels last week, the industry-funded American Petroleum Institute (API) said yesterday.
"We have recently seen some good economic data from the United States, and the market should appreciate that there is a strong correlation between oil and the economy," said Mark Pervan, a senior commodities analyst at ANZ in Melbourne.
Yesterday's release of minutes from the Fed's last policy meeting indicated the US central bank could maintain ultra-low interest rates for even longer than investors have anticipated if the economic outlook worsens or inflation drops, boosting confidence that demand for commodities will continue to grow.
"Oil has probably moved into a new trading range, with a floor around $85 creating a bit of additional long buying," Mr Pervan said. "The market will take the gasoline stockdraw as a buying signal as we move into the driving season."
US crude oil stockpiles increased less than expected, according to the API, adding 1.1 million barrels in the week ended April 2nd.
But inventories of distillates, comprising heating oil and diesel, rose unexpectedly as refineries processed more crude, the API said.
Government data on US inventories last week will follow today at 10.30 am EDT (1430 GMT) from the Energy Information Administration (EIA).
Crude stockpiles were expected to have climbed 1.8 million barrels for their 10th consecutive weekly gain, a Reuters survey showed, while gasoline supplies probably fell by 800,000 barrels.
European shares hit an 18-month closing high yesterday, even as gains were capped by doubts about Greece's ability to emerge from its fiscal crisis.
Oil prices traded in a range of less than $15 and below $84 a barrel in the first quarter, surpassing that level on April 1st for the first time since 2008.
Members of the Organisation of the Petroleum Exporting Countries have signalled a preference for prices between $70 and $80.
In its latest monthly forecast, the EIA said world petroleum consumption this year will rise by nearly 1.5 million barrels per day, 10,000 bpd lower than its estimate last month, from 2009's total to 85.5 million bpd this year.
The 1.5 million bpd growth is the result of an expected recovery in the global economy, with world gross domestic product seen rising by 3 per cent this year, the EIA said.
Reuters